LUXURY RETAIL MANAGEMENT

Michel Chevalier & Michel Gutsatz: Luxury Retail Management: How the World's Top Brands Provide Quality Product & Service Support“Part conceptual, part operational, the book is truly insightful. Each chapter prompts key questions that luxury professionals are facing, and thanks to the authors’ trusted expertise, the insights and solutions described are very
inspiring.”
– Thomas Lindemann, Group HR Director, Richemont International
“This book, for the first time, goes beyond intuitive thinking on retail and ‘lasers’ in on the rational and technical tools that make it happen. This book will become required reading for those willing to expand their expertise in luxury management.”
– Daniel Piette, Chairman of L Capital; President of LVMH Investments Funds

Private Label Beauty Brands: an Executive Briefing

Private Label Beauty Brands: an Executive Briefing for EurostafA complete Report written for Eurostaf:
The new competitive brands environment
Why are private label brands a major issue today?
What are the main trends driving the growth of private label brand?
What are the different strategies led by retailers and the different business models?
What are the key success factors of private brands?
What are the new challenges faced by national brands?

Recherchez sur BrandWatch/Search BrandWatch

PaperBlog

Technorati

Walmart

April 15, 2012

I would like to draw attention to the three recent initiatives by Walmart that reflect the brand's strategy in matters of digital communication:

Creating a bond with consumers: "Get on the Shelf" is a competition where one can propose a product ("innovative" / "fun" / "cute"), using a video. Netizens are then asked to vote for it, and the winning product is subsequently referenced at Walmart stores. The statistics are impressive: between 9th January and 22nd February, 4,000 products were submitted (a refrigerated 'lunch-bag' / a repair kit for glasses / water sold to benefit people without access to water, etc.). On March 7th, the first day of voting, 93% of the products elicited votes. Around 55,000 votes were received everyday, for 92,000 visits. The 10 finalists have just been announced:

Creating links with marketing teams and helping brands to grow: Walmart offers brands they work with a "Retail Development Kit". This includes offering them several platforms on which to project themselves: joint TV commercials / advertising on video screens in shops / advertisements on the walmart.com site and - even more innovative - the opportunity to "piggyback" on Walmart's social media programmes - such as "My Local Walmart" on Facebook - and thus access the 10 million Facebook fans of the brand, store by store.

Equipping itself with a digital laboratory for ideas: these initiatives all spring from @WalmartLabs, a structure inaugurated in April 2011. This team describes itself as an "innovator in social and mobile commerce" - "this is where we define the future of commerce". One of its most ambitious projects is the "Social Genome": "The Social Genome is a giant knowledge base that captures interesting entities and relationships of the social world. Example entities include people, events, topics, products, locations, and organizations. Example relationships include a person being interested in a topic, a person attending an event, an event is about a certain topic, an organization is associated with a product, and so on".

Walmart, in just one year, armed itself with a true digital strategy - by buying start-ups in Silicon Valley and locating all its digital operations in California (AdAge tells us that "In April, Walmart purchased Twitter app developer, Kosmix, for $300 million and instantly refashioned it as Walmart Labs, its social and e-commerce research-and-development unit in Mountain View, Calif. Within months, Walmart Labs had added advertising network OneRiot and mobile app developer Small Society - acquisitions aimed at grabbing talent - and had managed to assemble a formidable presence in Silicon Valley").

November 13, 2011

The players in mass-market retail are now conducting exciting experiments with a view to integrating sales through their stores and on-line. Retailers have to cope with two factors they had not anticipated:

The strong growth of e-commerce - and its relative tardiness: for instance, e-commerce represents less than 2% of Walmart sales in the U. S.

Direct competition from "pure players" such as Amazon and eBay

Amazon, now the largest on-line store (with an annual growth rate of about 30%!), is a direct competitor, with an offer that extends even to fresh products.

eBay has just launched a unique m-commerce initiative: showcases displaying products flanked by QR-codes have just been inaugurated in New York. The CEO of eBay says: "Retail and e-commerce are becoming one. Consumers don't make a distinction between the two".

It is worth keeping track of the initiatives taken by Walmart and Tesco:

Walmart has just opened two pop-up stores in Californian shopping malls (100m2 and 300m2). These temporary boutiques have been opened under the walmart.com banner: here consumers may either collect the orders they placed on the Internet, or discover a range of products with high added-value (toys, communication devices, computers, video games ..) and order them on the spot.

Tesco is experimenting with a virtual store in the Korean metro: entire walls are covered with images of products with their prices and QR-codes, allowing consumers to shop virtually and be delivered the same day (for orders reaching before 7:00 p.m.). The results of this initiative far exceeded Tesco's expectations as shown in the following video:

Two lessons can be learnt from these various examples:

A distributor can thus grow without creating new traditional bricks-and-mortar outlets: not hypermarkets but virtual walls or pop-up stores.

What drives these initiatives is not e-commerce but m-commerce: the ubiquity of mobile phones and the extensive use that consumers make of these tools is a real point of contact between brands and their clients.

February 20, 2011

One after the other, two distributors were called to order on ethical issues:

A report by Mediapart (in French) drew attention to the ethical contradictions of Marks & Spencer: in 2006 the British brand organized a campaign, "Look Behind the Label" - which was hailed as highly innovative and won many awards. Marks & Spencer highlighted its commitments to fair trade, environmental protection, animal welfare, responsible fishing… We are now in 2011 and the UK brand seems to have forgotten that responsible and sustainable policy today has to include the human dimension as well: the Mediapart report reveals that the working conditions in the Chinese textile factories manufacturing for M&S are unacceptable. As FashionMag.com reports, "in the Per Una factory, which manufactures skirts for the UK distributor, the workday extends from 8:00 a.m. to 9:00 p.m. or 10:00 p.m., with just two days off … per month; in another factory that manufactures swimwear, the working hours were 7:00 a.m. to 9:00 p.m. with lodging in premises considered as unhygienic". These commitments – they were indeed innovative in 2006 - are not sufficient today: the Sustainability Index introduced by Walmart in 2009 – which devotes an entire section to "ethical and responsible production" raises new questions such as: "Do you have a process for managing social compliance at the manufacturing level? Do you work with your supply base to resolve issues found during social compliance evaluations and also document specific corrections and improvements?" This campaign was part of the strategic repositioning of a brand in decline - and has certainly achieved its goal. However the concept of "responsibility" evolves over time: Marks & Spencer needs to revise its commitments.

Groupon - the group-purchase shopping site that became one of the Web wonders in just one year - made a strategic error in its advertising choices at the recent Super Bowl. Promoting "causes" such as the survival of whales, Amazonian rainforests or Tibet, with the backing of stars (including Elizabeth Hurley) Groupon advertised its advantages with off-colour humour: "The people in Tibet are in trouble. Their very culture is in jeopardy... but they still whip off an amazing fish curry", and ended by advising its groupers to buy food in a restaurant! Having made honourable amends and rewritten their ads, Groupon is faced with another challenge: wishing to enter the Chinese market, they face an outcry from Chinese netizens drawing attention to these ads! Even after attributing a part of the uproar to Chinese nationalism, it is clear that Groupon did not measure the direct (USA) and indirect (its entry into the Chinese market) consequences of its campaign.

We are finally entering the 21st century which - as The Scriptorium Company, in its analysis of Megatrends shows - will be an age of accountability. Web Power will only further assure the development of these new ethical rules and the demand for the empowerment of citizen-consumers (as we are seeing today with the 2.0 revolutions in the Arab countries): brands will really have to be irreproachable.

February 06, 2011

In the report drawn up in 2010 for Eurostaf ("Private Label Beauty Brands": see details in the left column of BrandWatch), I identified four strategies among beauty private labels - one of which seemed to me the most promising: creating exclusive brands. Two recent launches in the U.S. show that this strategy is forging ahead.

Walmart launched geoGirl in February - a makeup brand designed for the 9 to 12-year age group (!!): this exclusive brand (69 references) has two major characteristics:

GeoGirl is owned by Pacific World Corp. - a company that manufactures beauty products (mostly artificial nails) for the mass-market, either under its own brand name (Nailene) or for international brands (Revlon). Walmart will distribute this brand exclusively for at least a year.

Walgreens has launched Borba (which was distributed exclusively by Sephora for a while) - a brand of cosmeceuticals and food supplements ("Inside-Out Beauty Solutions"), created by Scott Vincent Borba in 2004 and built around "superfruits". Banking on the acquisition of Duane Reade in 2010 (that referenced Borba), Walgreens seeks to penetrate the premium beauty segment: one may wonder if it is not Borba too that is repositioning itself as more "mass-market": Crystalline (a 'beauty' drink) was sold at $100 for 60 (or $ 1.67 each) by Sephora, and $ 7.19 for 7 (or $ 1.03 each) at Walgreens – a whopping 38% less! (the packaging has also changed – definitely less premium).

October 10, 2010

Sam's Club – Walmart's "warehouse store" chain (customers pay $40 a year for access to storehouses where the products are displayed on pallets, at "discount" prices) – has just announced that they were introducing a new range of beauty products, SoPhyto. The launch made headlines at WWD recently and deserves reflection.SoPhyto is a British brand of organic beauty products, certified by the Soil Association. It claims a professional positioning, ethical, emphasizing the use of natural ingredients: until now it was sold in Medispas, medical offices and through e-commerce.

Presented on branded pallets, the SoPhyto products will find themselves next to L'Oreal, Olay, Neutrogena... This initiative raises some interesting questions:

Sam’s Club has exclusive distribution rights for the U.S.: we see here once again a distributor that has acquired a proprietary beauty offer - not with its own private label - but with a brand with its own authenticity. The products offered have been specially created for Sam's Club.

The choice of an organic brand certified by an European organism is interesting - in a country that has not been able to dispose of a procedure for real organic certification so far.

The highlighting of the brand - unusual for Sam's Club - shows the growing importance that the beauty category has for these distributors.

We may finally ask the question, from the perspective of the brand, how will it manage this positioning, ranging from Medispas and medical offices to discounters...?

The debate on "SKU Rationalization" was launched. Walmart was pleased with the results: "Our 'win, play, show' merchandising strategy has resulted in greater clarity of our offerings across the entire store and therefore cleaner assortments. We will continue to accrue benefits from 'win, play, show', strategy this year". (Eduardo Castro-Wright, Vice Chairman, Wal-Mart Stores, Inc.)... and announced reductions in the number of references of as much as 18% in some categories. This is reflected by both a net reduction in varieties, and for the first time, by the disappearance of entire ranges of products. U.S. retailers have put forward the fact that increasing the ranges and new product lines did not create any value - and therefore unlisted them in order to increase the productivity of their shelves. After Walmart, most of the other distributors did the same: Kroger created a similar programme with dunnhumby, Walgreen launched its "Customer Centric Retail Program".

This movement was accompanied ... by the development of their own private brands: Walmart thus unlisted the Glad and Hefty packaging products and replaced them with the Great Value references. The reasoning is simple: "I un-list brands that are non-leaders - keeping the two or three most important brands for the most part... and I replace them with a private label".The results were diverse - and largely depended on the category:

Wal-Mart just announced they were reintroducing 300 to 400 grocery references: "There were some examples when we thought we could take a product out of the assortment and the consumer would substitute something [else], and We made a mistake...".

Giant Food Stores (a subsidiary of Ahold) have made public some of the results of the experiment they conducted on 20 categories since 2009: in frozen vegetables (where they reduced the selection by 13% - from 217 to 188) sales stagnated in value but the margin, sales volume, and number of customers increased / cooked chicken (which was reduced from 69 to 63 references) saw increases in value, volume, margin and number of customers / on the contrary, the fruit juice category yielded poor results.

A recent study by Nielsen ("Too Much Choice and Variety: Assortment Realities") shows that in 2009 the market share of private labels increased at the expense of entry-level national brands and new products; "premium" national brands remained stable.

I am convinced that the process of rationalization of product ranges is just beginning and will spill over U.S. boundaries:

Retailers will learn how to manage their references better and will gradually reduce the number – by fine-tuning their market tests.

They will use the opportunity to durably install their private labels.

The secondary national brands, variants like the "me too" ranges without real added value will be the first victims of this rationalization.

The leading national brands have already reacted on seeing the opportunity that this movement offers them - and their flagship products: "We're pushing it because it will make room for our power items that are out-of-stock all the time and have to be continuously replenished, and we're trimming our own portfolios and seeing productivity enhancements". (Survey conducted by Bishop Willard among vice presidents of sales in 25 companies).

April 17, 2010

Levi's does not stop "reinventing" itself, to quote the Wall Street Journal. The brand is growing upwards and downwards. Two details seem to prove this, but is there a strategy at all?

The brand is re-launching its top-end range: It has restructured its premium offers, retaining only two lines, Made & Crafted ("a premium denim line featuring Better fabrics and fit"), and Levi's Vintage Clothing which offers re-editions of its classic models. This offer - with prices between $ 148 and more than $ 200 - is distributed through circuits that are unusual for the brand, such as Barney's and Saks.

The company has just announced the launch of an entry-level brand, reserved exclusively for the Chinese market. Levi's, which already has a strong presence in China with 620 outlets, intends to position the new brand in the $ 40 / $ 60 price range and distribute it in its own boutiques (20 expected to open in 2010 - with a target of 1,000 in 2015). This brand is conceived as an entry-level brand allowing an entirely new Chinese clientele access to Levi products.

This announcement reminds me of a previous initiative by Levi's in 2003: the creation of the Signature by Levi Strauss range. Seeing the growth of private labels in jeans - and wishing to cater to all customers who buy jeans in supermarkets (representing approximately 40% of market share in the USA), Levi's conceived the "Sell Where They Shop" strategy, a sub-brand dedicated to major retail outlets and distributed at Walmart (among others). Two converging points are worth noting:

Levi's has never marked down its products - and therefore this price-cutting strategy is a first.

The logo chosen immediately shows why this line is doomed to failure: the consumer is convinced that it is a cheaper Levi's product - which is totally contrary to the brand’s positioning. Nothing shows that it is a line called "Signature".

Launched in Europe, then in Asia, the consequences were immediate. I would name 3:

In 2005, Walmart launched its jeans under its own brand, Metro7: 10% to 15% more expensive than Signature but much more "stylish". In the first quarter of 2006, Levi's announced that Signature sales had fallen sharply because of Metro7’s success. This relative failure is therefore not a question of price, but of the offer.

In September 2006 Levi's announced that Signature would be withdrawn from Europe in June 2007: it had never managed to impose itself, representing less than 3% of the jeans market in supermarkets in France.

The strategy was completely overhauled - with a new logo as the essential element: Levi Strauss (finally) becomes "guarantor" of a “Signature” brand.

Despite this, Signature still represents only 5% to 6% of Levi sales (mainly the U.S.) and it does not seem that it is making an effort to really develop itself. One might therefore ask why the company is launching a new brand in China: why not use Signature?

February 20, 2010

Walmart continues taking initiatives in sustainable development - by placing videos concerning the efforts it makes in recycling at the disposal of the press as well as its customers. The latest is interesting from several points of view:

In 2006 Walmart announced that it had asked its suppliers to reduce the volume of their packaging by 5% before 2013. Here Walmart shows that it applies this restraint to itself ... by using recycled cardboard for its pizzas.

The video shows the client all the advantages of buying a Walmart private brand pizza ... the box is recycled (the same approach was highlighted in a previous video 'The secret life of sour cream')

The private brand fresh pizza in question is "Marketside", the new private brand conceived as an extension of the Marketside by Walmart stores I referred to last week. The retailer here confirms its strategy for launching this new private brand by showing that, in addition, some of its packaging is recycled...

February 06, 2010

Last July, I spoke about (in "Even Walmart Can Falter") the new concept launched by Walmart at the end of 2008: Marketside. These are small food supermarkets dedicated to "ready to eat" and "ready to heat", where the chain offers a large fresh-food section, ready-to-serve dishes, delis, etc. There are currently 4 of these stores in Arizona (thank you, mypbrand.com, for the photos!). It does not seem like any new shops are being launched. The rest of the story is fascinating and offers us a remarkable example of brand extension.

In July 2009, Walmart announced they were launching a private brand, "Marketside", with an offer of pre-prepared meals - available in selected stores. Some of the items found under the name of "Sam's Choice", their generic private label, are now found under "Marketside."

In September 2009 the brand began to rename the "delis" in some of its stores in Arizona and Texas ... "Marketside Delis”. Here one finds fresh food, wholesale, and pre-prepared, under the brand name "Marketside."

We thus find here a very consistent strategy of brand extension in 3 phases:

Up against Tesco (the arrival of Fresh & Easy), the creation of a concept store to "learn" the fresh and "deli" business - This concept is not meant to spread itself (at least short term).

Setting up Marketside “corners” in neighbourhood WalMart stores - which can only strengthen the real Marketsides.

Creation of a private brand that will be found in all Walmarts - and thus investing the brand with a "fresh" image it did not have hitherto.

January 23, 2010

In May 2009, Wal-Mart pursued its "green" and "responsible" offensive by discreetly launching a revolutionary tool: GreenWERCS. It consists of software that analyses the ingredients of all non-food products available in the store. This software contains an algorithm that evaluates and weighs the risks involved in using each of its ingredients: it detects substances that are “persistent, bio-accumulative and toxic (PBTs)”, CMR ("carcinogens, mutagens or reproductive toxicants"), endocrine disruptors, and evaluates the waste associated with the use of the ingredient. The presence of nano-substances will be taken into account in the next version, GreenWERCS 2.0. As stated in Walmart's Sustainability Report 2009: "In our 2007 report, we discussed plans to identify 20 chemicals of concern that we would work to eliminate from products sold at our stores. Since that time, we believe we have found a more effective way to address this issue and provider customers with our products that are environmentally preferable. By working in a collaborative process with the members of our Chemicals Sustainable Value Network, we have identified a screening tool, called GreenWERCS, that will provide us with a far more comprehensive view of the products we sell than methods we previously identified. GreenWERCS will help us analyze the products on the market and identify risks across a broad spectrum instead of looking at each chemical individually. " The working group behind GreenWERCS has thus reviewed all available research work and American and European recommendations (especially those of REACH) concerning chemical products. GreenWERCS represents the second phase of the Walmart approach with regard to chemical products: The first consisted of obliging its suppliers to provide a complete list of ingredients in the products sold by them, to a third party organization, WERCS (Worldwide Environmental Regulatory Compliance Solutions). This new Walmart initiative inspires 3 comments:

Faced with the reluctance of U.S. authorities in the matter, it is a private company that acts as potential regulator.

We can expect the 3rd phase of this process: Walmart is likely to oblige its suppliers (all brands) to change the risky ingredients. Self-regulation is therefore going to become a large part of the restrictions imposed by retailers like Walmart.